Economic Uncertainties Swirl Following Japarov’s Rapid Rise to Power
Nov 23, 2020
In October 2020, nationalist opposition figure Sadyr Japarov came to power in the Kyrgyz Republic, becoming the prime minister and interim president. His rapid rise to power followed weeks of chaos that saw the former pro-Russian Kyrgyz President Sooronbai Jeenbekov ousted after skepticism swirled over the latest election results. The rapid pace of events and concerns over the unpredictable nature of the new administration are negatively impacting the country’s economic landscape. Coupled with the fallout of the COVID-19 pandemic, perceptions of an unstable government will only exacerbate worries that the Kyrgyz Republic is on track to experience significant economic downturn.
Civil unrest in the Kyrgyz Republic has given rise to widespread looting. Particularly concerning for officials is disorder at mining facilities. Mining is a critical component of the Kyrgyz economy and the country’s primary commodity. The mining industry has grown to account for more than half of the Kyrgyz Republic’s industrial production and comprises 29.2 percent of the total economy. However, several key mining facilities were forced to suspend operations after groups broke onto their grounds. Although the largest gold mine in the country, Kumtor, which contributed 9.7 percent to the country’s GDP, accounting for about $250 million was spared from the civil unrest that forced similar operations to close, the uncertainties still sent the stock of Centerra, the mine’s operating company, plummeting 18 percent since the crisis began. The drop in stock value spells concerning news for the Kyrgyz government, which controls about 26 percent of Kumtor’s sales. The International Business Council estimates that the country loses $50,000 each day that the mines remain out of operation.
Japarov’s nationalist sentiments are also concerning for foreign investors operating in the country. China is a vital economic partner for the Kyrgyz Republic. Chinese Ambassador Du Dewen expressed her uneasiness about the unfolding situation and requested that Chinese citizens in the Kyrgyz Republic be shielded from political unrest. Nonetheless, Chinese business leaders faced backlash across the country. For example, 35 Chinese executives were surrounded in a hotel by disgruntled locals in Bishkek. At a mine, more than 100 Chinese workers fled into the snowy forest to evade a mob that had taken over their facility. Chinese workers at the Kara-Balta mine were pressured into paying a hefty protection fee. China is the Kyrgyz Republic’s largest source for foreign direct investment (FDI), accounting for approximately 50 percent of FDI in the Kyrgyz Republic, about 2-7 percent of the country’s GDP. Japarov’s nationalist stance has put Chinese businesses on edge and could impact the economic relationship between the two countries.
Even before the election and the unrest that followed, the Kyrgyz economy was already projected to suffer a considerable contraction. The COVID-19 pandemic prompted the government to issue stay-at-home orders and shutter nonessential businesses. In May 2020, the World Bank predicted that a decline in economic activity would result in a four percent decrease in GDP for the year. More bleak still, in August 2020, the United Nations Development Program (UNDP) and the Asian Development Bank (ADB) forecasted that the country would suffer from a ten percent drop in GDP. Uncertainties surrounding Japarov’s ascension to power are likely to accelerate economic decline.
President Jeenbekov’s ouster and the rapid transition of power to Japarov have hindered regular economic activity in the Kyrgyz Republic and raised serious concerns among mine owners, foreign investors, and economic analysts. As mines continue to sit idle or operate at less-than-full capacity due to the unpredictable nature of the current administration, the Kyrgyz economy will suffer. Mining is the country’s most lucrative industry and an impediment on its extraction and sales will leave a lasting impact on the country’s growth. Japarov’s rhetoric and recent civil disorder have caused Chinese businesses to become wary of further engagement in the country. Lastly, economic uncertainties will only make matters worse for an economy already hobbled by the pandemic. In order to put the Kyrgyz Republic on the road to recovery, Japarov must prioritize easing the concerns of foreign investors and shielding the country’s prized mines from political unrest.